Tesco has stated that the conflict in the Middle East has affected consumer sentiment, but the supermarket giant emphasized that the war has not yet resulted in higher prices. This comes as the FTSE 100 company reported a weaker-than-expected increase in sales over the past three months.
Consumer Sentiment Impacted
Chief Executive Ken Murphy commented: "The war in the Middle East has impacted consumer sentiment, more to do with fear about what might happen." However, he noted that there has not yet been a "material" impact on shopper behavior or consumption as a result of the conflict.
Murphy also stated that the conflict, which has driven up oil and gas prices, has not contributed to sharper food price inflation. Tesco reported that its food inflation in the latest quarter was below the 2.2% figure released by the Office for National Statistics on Wednesday, which was the lowest since 2024.
The rate of price inflation over the past three months also slowed compared with the previous quarter. This comes after the Institute of Grocery Distribution (IGD) warned earlier this week that food inflation could peak at 5.5% in the second half of this year.
Potential Easing of Inflationary Concerns
However, inflationary concerns may be alleviated following the news that US President Donald Trump and Iran's Masoud Pezeshkian signed an initial agreement to end the war.
Tesco revealed that total sales increased by 1% to £16.8 billion over the 13 weeks to May 30, compared with the same period last year. Tesco UK and ROI (Republic of Ireland) saw like-for-like sales grow by 1.8%, driven by positive growth in food sales.
Sales Growth Details
Despite this, it represented a slowdown in growth compared with the prior quarter. The grocery firm said food sales were 2.6% higher, with fresh food up 3.6% and its Finest range seeing a 9% jump. The group maintained its profit guidance for the year, indicating it expects to deliver operating profits between £3 billion and £3.3 billion.
Murphy added: "I am pleased with our progress in the first quarter, with customer satisfaction up strongly and continued sales growth building on the exceptional performance we delivered last year. With the conflict in the Middle East creating ongoing uncertainty for many households, we remain focused on giving customers the very best combination of price, quality and service."
The update came ahead of Tesco's annual general meeting on Thursday, where shareholders will vote on several resolutions, including the executive pay package that awarded Murphy an annual deal of £10.8 million for last year.
